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Liquidity Risk The liquidity risk of banks arises from funding of long-term assets by short-term liabilities, thereby making the liabilities subject to rollover or refinancing risk. The liquidity risk in banks manifest in different dimensions - a Funding Risk: Funding Liquidity Risk is defined as the inability to obtain funds to meet cash flow obligations.
For banks, funding liquidity risk is crucial.
Time risk arises from the need to compensate for non-receipt of expected inflows of funds i. Call risk arises due to the crystallisation of contingent liabilities.
It may also arise when a bank may not be able to undertake profitable business opportunities when it arises. Interest rate Risk can take different forms. Market Risk The risk of adverse deviations of the mark-to-market value of the trading portfolio, due to market movements, during the period required to liquidate the transactions is termed as Market Risk.
This risk results from adverse movements in the level or volatility of the market prices of interest rate instruments, equities, commodities, and currencies.
It is also referred to as Price Risk. Forex risk is the risk that a bank may suffer losses as a result of adverse exchange rate movements during a period in which it has an open position either spot or forward, or a combination of the two, in an individual foreign currency.
Market liquidity risk arises when a bank is unable to conclude a large transaction in a particular instrument near the current market price. Default or Credit Risk Credit risk is more simply defined as the potential of a bank borrower or counterparty to fail to meet its obligations in accordance with the agreed terms.
For most banks, loans are the largest and most obvious source of credit risk. It is the most significant risk, more so in the Indian scenario where the NPA level of the banking system is significantly high.
The counterparty risk is generally viewed as a transient financial risk associated with trading rather than standard credit risk. This is also a type of credit risk where non-performance of a borrower or counterparty arises due to constraints or restrictions imposed by a country.
Here, the reason of non-performance is external factors on which the borrower or the counterparty has no control Credit Risk depends on both external and internal factors.
The major external factors are the state of Economy, Swings in commodity price, foreign exchange rates and interest rates, etc. Credit rating is the main tool for measuring credit risk and it also facilitates pricing the loan.
By applying a regular evaluation and rating system of all investment opportunities, banks can reduce its credit risk as it can get vital information of the inherent weaknesses of the account. There should be provision for flexibility to allow variations for very special circumstances.
Managing operational risk has become important for banks due to the following reasons — Higher level of automation in rendering banking and financial services Increase in global financial inter-linkages The scope of operational risk is very wide because of the above-mentioned reasons.
Two of the most common operational risks are discussed below — a Transaction Risk: Transaction risk is the risk arising from fraud, both internal and external, failed business processes and the inability to maintain business continuity and manage information.
Compliance risk is the risk of legal or regulatory sanction, financial loss or reputation loss that a bank may suffer as a result of its failure to comply with any or all of the applicable laws, regulations, codes of conduct and standards of good practice.
Other Risks Apart from the above-mentioned risks, following are the other risks confronted by Banks in course of their business operations — a Strategic Risk: Strategic Risk is the risk arising from adverse business decisions, improper implementation of decisions or lack of responsiveness to industry changes.
Reputation Risk is the risk arising from negative public opinion. This risk may expose the institution to litigation, financial loss or decline in customer base. It is a risk inherent to the entire market segment and is not sector specific it is also known as undiversifiable risk.
It is kind of specific risk which comes with the industry you invest in also referred to diversifiable risk. Risk Management is actually a combination of management of uncertainty, risk, equivocality and error.
Uncertainty — where the outcomes cannot be estimated even randomly, arises due to lack of information and this uncertainty gets transformed into risk where the estimation of outcome is possible as information gathering progresses.Faculty(Credit/Risk Management/ International Banking)-State Bank of India (SBI).
Studies in the past have compared various parameters related bank performance including credit risk measurement and management between Private and Public Sector Banks.
A review of the literature on. The State Bank of India (SBI) announced on Tuesday it has formed a partnership with Moody’s Analytics to provide bank-wide credit certification to SBI’s employees enabling them to source. The officer also had stint in State Bank of India, Frankfurt Branch.
Shri Haridas with varied experience in Treasury Operations, SAMG, Risk Management, Retail Business and Corporate Credit assumed charge as DMD (Retail . CASE ANALYSIS: STATE BANK OF August 7, Credit Risk Management Intern State Bank of India.
October – Present 2 months. Web Editor State Bank of India. Narsee Monjee Institute of Management Studies (NMIMS) Navi Mumbai.
View profile. View profile badges. Search by timberdesignmag.com: PGDM Finance | Narsee Monjee . Successfully implemented Credit risk modeling & Online modeling of credit underwriting in SME segment within Bank with Boston Consulting Group & Mckinsey timberdesignmag.com having vast experience in the area of Credit Risk management,Branch Banking, Relationship Banking and Stressed Asset Resolution timberdesignmag.com: Head Credit & Risk Modeling at .